nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2012‒06‒05
eight papers chosen by
Alexander Harin
Modern University for the Humanities

  1. The Impact of Proposed Federal Tax Reform on Farm Businesses By Williamson, James M.; Durst, Ron L.
  2. Trade Credit and Taxes By Mihir A. Desai; C. Fritz Foley; James R. Hines Jr.
  3. Local Spending, Transfers and Costly Tax Collection By Fernando Aragon
  4. Dividend Policy, Corporate Control and the Tax Status of the Controlling Shareholder By Christian Andres; André Betzer; Marc Goergen
  5. Optimal labor-income tax volatility with credit frictions. By Abo-Zaid, Salem
  6. Squeezing the state: tariff revenue, state capacity and the WTO’s Doha Round By James Scott
  7. Credit Constraints in Intangible Investments (Japanese) By MORIKAWA Masayuki
  8. Financial reforms and international trade: By Chen, Xing; Munasib, Abdul; Roy, Devesh

  1. By: Williamson, James M.; Durst, Ron L.
    Keywords: Federal Tax Reform, Agriculture, Farm Business, Agricultural Finance, H20, Q14,
    Date: 2012
  2. By: Mihir A. Desai; C. Fritz Foley; James R. Hines Jr.
    Abstract: This paper analyzes the extent to which firms use trade credit to reallocate capital in response to tax incentives. Tax-induced differences in pretax returns encourage the use of trade credit to reallocate capital from firms facing low tax rates to those facing high tax rates. Evidence from the worldwide operations of U.S. multinational firms indicates that affiliates in low-tax jurisdictions use trade credit to lend, whereas those in high-tax jurisdictions use trade credit to borrow: ten percent lower local tax rates are associated with net trade credit positions that are 1.4 percent higher as a fraction of sales. The use of trade credit to get capital out of low-tax, low-return environments is also illustrated by reactions of U.S. firms to the temporary repatriation tax holiday in 2005, when affiliates with positive net trade credit positions were significantly more likely than others to repatriate dividends to parent companies in the United States.
    JEL: F23 G31 G32 H25
    Date: 2012–05
  3. By: Fernando Aragon (Simon Fraser University)
    Abstract: This paper studies the effect of costly taxation on the fiscal response of local governments to intergovernmental transfers. Using a panel dataset of Peruvian municipalities, I find robust evidence that central government's grants have a greater stimulatory effect in municipalities facing higher tax collection costs. The results are consistent with costly taxation partially explaining the flypaper effect.
    Keywords: Flypaper effect; Intergovernmental transfers; Fiscal decentralization
    JEL: H71 H77
    Date: 2012–05
  4. By: Christian Andres (WHU – Otto Beisheim School of Management); André Betzer (Schumpeter School of Business and Economics, Bergische Universität Wuppertal); Marc Goergen (Cardiff Business School and European Corporate Governance Institute (ECGI))
    Abstract: This paper studies the impact of the concentration of control, the type of controlling shareholder and the dividend tax preference of the controlling shareholder on dividend policy for a panel of 220 German firms over 1984-2005. While the concentration of control does not have an effect on the dividend payout, there is strong evidence that the type of controlling shareholder matters as family controlled firms have high dividend payouts whereas bank controlled firms have low dividend payouts. However, there is no evidence that the tax preference of the large shareholder has an impact on the dividend decision.
    Keywords: dividend policy, payout policy, Lintner dividend model, tax clientele effects, corporate governance
    JEL: G32 G35
    Date: 2012–05
  5. By: Abo-Zaid, Salem
    Abstract: This paper studies the optimality of labor tax smoothing in a simple model with credit frictions. Firms’ borrowing to pay their wage payments in advance is constrained by the value of their collateral at the beginning of the period. The labor tax and the shadow value on the credit constraint lead to a (static) wedge between the marginal product of labor and the marginal rate of substitution between labor and consumption. This paper suggests that while the notion of “wedge smoothing” is carried over to this environment, it is achieved only through a volatile labor-income tax rate. As the shadow value on the financing constraint varies over the business cycle, tax volatility is needed in order to counteract this variation and thus allow for “wedge smoothing”. In particular, the optimal labor-income tax rate is lower when the credit market is more tightened and higher when the credit market is less tightened. Therefore, when firms are more credit-constrained and the demand for labor is reduced, optimal fiscal policy calls for boosting labor supply by lowering the labor-income tax rate.
    Keywords: Labor tax smoothing; Credit frictions; Borrowing constraints
    JEL: E62 H21 E44
    Date: 2012–05–11
  6. By: James Scott
    Abstract: Abstract Tax revenue forms a critical element of state capacity, in turn underpinning the state’s ability to foster inclusive economic growth. This paper calculates the impact of the WTO’s Doha Round on tariff revenues among low-income countries. It finds that some, though not all, are severely affected, losing up to 17 percent of total government tax revenue. In addition, the tariff cuts are found to be regressive, primarily affecting luxury items, such as motor vehicles. Finally, the paper analyses the effectiveness of the mechanism included in the Doha Round to overcome lost tariff revenue, namely aid for trade.
    Date: 2012
  7. By: MORIKAWA Masayuki
    Abstract: This paper, using Japanese firm level data, empirically analyzes the credit constraints in intangible investments. We estimate investment functions where cash flow is used as a key explanatory variable. We then observe differences in the sensitivity of investments to cash flow by the type of assets, industry, firm size, and firm age. According to the estimation results, investments in intangible assets are more sensitive to internal capital compared with investments in tangible assets, which suggest the existence of market failure in the financial markets. This market failure is more serious for small- and medium-sized enterprises (SMEs) and young firms. On the other hand, actual policies to promote investments are concentrated on tangible assets with the exception of R&D investment. The analysis of this paper suggests that investment tax credits and financial support for SMEs should focus more on intangible investments.
    Date: 2012–05
  8. By: Chen, Xing; Munasib, Abdul; Roy, Devesh
    Abstract: This research has been undertaken to estimate the effects of one of the major impediments to trade particularly of developing and less developed countries meaning credit constraints. In this paper we address the issue of easing of financial constraints on trade flows. Financial repression is generally a common characteristic across many developing countries. We provide evidence that financial reforms (over the period 1976–2005) significantly affected exports, in particular of industries with high external capital dependence and low asset tangibility. The coverage of reforms is comprehensive, encompassing the banking sector, interest rates, and equity and international capital markets. Our methodology improves upon existing studies by controlling for time-varying unobserved exporter characteristics. We find significant effects of various reforms with diverse impacts by intensity. China emerges as a consistent outlier, but the results are robust to its inclusion or exclusion. Further, event studies that incorporate possible anticipated and lagged effects of commencement of reform policies confirm the findings.
    Keywords: financial reforms, external capital dependence, asset tangibility, time-varying unobserved heterogeneity, event study,
    Date: 2012

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